A $1.7 billion U.S. government payment to Iran will be included in the Islamic Republic’s 90 percent military spending increase for the country’s 2016-2017 budget.
Iran’s Central Bank received the payment in January to settle an arms deal the former Shah of Iran made with the U.S. prior to the revolution in 1979. Iran’s Guardian Council, one of the most powerful political bodies in the country, ordered the bank to transfer the money to the military, which will see a 90 percent increase in the country’s 2016-2017 budget.
Initially, it was unclear what Iran was going to do with the money, with months going by until it was discovered in the budget. Saeed Ghasseminejad, an associate fellow with the Foundation for the Defense of Democracies, found the appropriation while sifting through the Iranian budget.
“Article 22 of the budget for 2017 says the Central Bank is required to give the money from the legal settlement of Iran’s pre- and post-revolutionary arms sales of up to $1.7 billion to the defense budget,” Ghasseminejad told Bloomberg View’s Eli Lake.
“[The budget] lets the government give the military $1.7 billion from a financial settlement reached in January,” he wrote. “This year’s spike in Iran’s military budget gives it greater resources to escalate its involvement in proxy wars in Syria, Iraq, and Yemen, and to accelerate the pace of its ballistic missiles program.”
It should be noted that the $1.7 billion is separate from the approximately $100 billion in unfrozen funds Iran is receiving via last July’s nuclear agreement, formally known as the Joint Comprehensive Plan of Action.
The funds in question are from a trust fund made up of a payment that former Iranian Shah Reza Pahlavi paid to the U.S. as part of an arms deal. Pahlavi, a one-time U.S. ally, was overthrown during the Islamic Revolution in 1979, causing the U.S. to freeze the arms deal. The initial $400 million payment has accrued interest over the last 36 years, which is why the U.S. ended up paying a total of $1.7 billion to the Islamic Republic.
Skeptics of last year’s nuclear agreement were worried that unfrozen funds would be directed towards Iran’s military activities. The country already has the largest stockpile of ballistic missiles in the region, and has engaged in several missile tests since the deal was made. Iran has also been a major contributor in exacerbating the sectarian conflict in Iraq and Syria.
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